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Types of Business Partnerships

Business is a broad term that can encompass many aspects of everyday life and it is the driving force behind society. A business is defined by Wikipedia as an organization or set of people organized for the purpose of earning a profit. This profit may be in the form of revenue or the services or products sold or traded. Business enterprises can be sole proprietorships, partnership, joint ventures, franchises, and many other forms. The most common types of businesses are listed below.

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A sole proprietorship is a form of business where the owner is the sole shareholder and responsible for the company’s profits. It is also commonly known as a partnership because partners share in the profits but are not legally responsible for them. Partnerships can be formed through any number of ways, including lease with the assets of one partner and inheritance through the death of another partner. A corporation is a separate entity from its shareholders and board of directors and has meetings at regularly scheduled intervals. Unlike partnerships, corporations have limited liability and are able to avoid personal lawsuits that stem from personal negligence or intentional misconduct. A business owned by a sole proprietorship is entirely liable for its own profits, which may not exceed the value of the assets owned by the owners.

A corporation has many advantages over a sole proprietorship or a partnership. In addition to limited liability and the ability to have multiple corporations for shares, there is also the advantage of being able to deduct expenses directly from the income tax. Also, unlike a sole proprietorship or a partnership, all shareholders are taxed the same regardless of their profits. A business structure designed to maximize tax benefits is typically designed with a limited liability company (LLC).

A limited partnership is a type of business structure that allows only two or three individuals to own shares in the business. It has several major advantages over a sole proprietorship, the main one being that it allows a shareholder to retain more of the profits. The limited partnership agreement sets forth the responsibilities and limitations between partners. There are some minor differences between a sole proprietorship and a limited partnership, including who can and cannot be a partner. One disadvantage of a limited partnership is that it does not provide a shield against liability for debts of the partners.

A corporation is a unique combination of the partnership and the sole proprietorship. In a corporation, all the partners share equal shares of the profits and losses of the business. This is an important asset in protecting partners in the event of a lawsuit. Additionally, in a limited partnership, there is typically no liability for the debts of other partners unless fraud is committed or the partnership is negligent.

There are many other differences between these structures, including the length of time each partner has to share in the profits and the extent of control each has over the business. There are also significant advantages and benefits to each option depending on the needs of your specific business. For example, if you have a new business with limited resources but you are willing to do everything possible to make sure that your business operates at maximum profitability, then a partnership would be an ideal choice for you. On the other hand, if you have a great deal of knowledge and experience in your field but lack capital funds for starting up and sustaining your business, then a sole proprietorship may be a better choice for you.